Soybean supply set to bulge at the seams

U.S. soybean ending stocks for the 2012-13 marketing year are estimated at 125 million bushels (3.4 million tonnes), or 4% of consumption. That would be the lowest level in history.

Unlike corn, the rationing process necessitated by last summer’s drought did not materialize broadly. Domestic usage is forecast to fall below last season’s by 5%, but exports have fared better than expected. The current USDA estimate for 2012-13 exports is 36.61 million tonnes, about the same as last season. Export commitments to date, however, stand at 35.49 million tonnes, with five months left to the marketing year. Last year at this juncture of the season commitments were only 30.84 million tonnes.

Naturally, old-crop sales are going to taper off, because the U.S. is all but sold out, and overseas buyers will be turning to South American origins until the U.S. 2013-14 crop is harvested this coming fall. Recent activity, though, shows that there is still demand for U.S. old crop. There were two weeks in mid-February of net cancellations, and it appeared that it was over for the season. In the following three weeks, however, sales bounced back, averaging 528,000 tonnes, which is very robust for this time of year.

Falling crush margins in China could temper its seemingly insatiable appetite for beans. The risk of further cancellations can therefore not be dismissed, but is limited because shipments have been very strong. As of the most recent export report, 31.67 million tonnes, or 86.5% of the USDA target, have been shipped. That is about the average ratio for shipments-to-final sales at this point of the season. In the meantime, Brazilian ports are congested, with delayed shipments estimated to be as long as 50 days. On March 19 a Chinese importer canceled a shipment of 2 million tonnes because of frustration over the delay. So it’s a good bet we’re not likely to see heavy US cancellations over the next month or so. By that time, we should be at or near the USDA target.

Weekly export data have become the key indicator to follow to determine the direction of old-crop prices. In addition, on March 29 we’ll get further insight into the domestic demand picture with the quarterly stocks report. The first comprehensive look at the 2013-14 marketing year will also come on March 29, with the release of the planting intentions report.

The USDA Outlook Forum in February provided a preliminary forecast for planted acres. Soybean area was estimated at 77.5 million acres. That would be just 300,000 acres above 2012-13 plantings and equal to the record set in 2009-10, but of course, yields are expected to bounce back. Yields for the 2012-13 drought-ravaged crop reached only 39.6 bushels per acre (bpa), down from the 5-year average of 42.2 bpa. The Outlook estimate calls for record yields of 44.5 bpa. With normal weather, US farmers should harvest 3.405 billion bushels of beans (92.8 million tonnes), 13% more than in 2012-13. That would exceed the record 3.359 billion bushels (91.5 million tonnes) set in 2009-10.